Dendritic cells (DC) are highly specialized antigen-presenting cells (APC) that initiate and modulate immune responses. They are essential for naive T cell activation, but may also play roles both in central and peripheral tolerance. Blockade of costimulatory pathways that provide the crucial second signal for lymphocyte activation is one strategy to augment the potential tolerogenicity of DC. Here, in vitro propagated DC were transduced using an adenoviral (Ad) vector to express the gene encoding cytotoxic T lymphocyte antigen 4-immunoglobulin (CTLA4lg), which blocks interaction of CD80 and CD86 on DC with CD28 on T cells. Supernatants of AdCTLA4lg-transduced DC strikingly inhibited mixed leukocyte reactions (MLR) induced by non-transduced DC. Whereas transduction of marker genes (LacZ or enhanced green fluorescence protein (EGFP)) did not alter their potent allostimulatory activity, DC transduced with CTLA4lg exhibited striking reductions in cell surface staining for CD86, but not MHC class II, and were poor stimulators of T cell proliferation and cytotoxic T lymphocyte (CTL) responses. In addition, they induced alloantigen-specific T cell hyporesponsiveness. They were detected, following local injection, in significantly increased numbers in the lymphoid tissue of unmodified allogeneic recipients. This is the first report of the functional properties of DC genetically engineered to express CTLA4lg.